Industries on the move: Healthcare, real estate and restaurants gain
Key sectors are gaining strength with the help of a robust commercial financing market.
Key sectors are gaining strength with the help of a robust commercial financing market.
As the U.S. economy improves, key sectors are gaining strength with the help of a robust commercial financing market. CIT Group Inc., a leading provider of financing to middle market companies, sees positive momentum during 2014 for the restaurant, commercial real estate and healthcare markets.
While each industry has individual characteristics and a different footprint, the overall brighter profile for the U.S. economy and available financing are impacting these three industries. Middle market companies are in a particularly favorable position, as many were able to continue to grow through the recession and executives are optimistic about their growth prospects.
Key CIT executives, who interact with industry leaders and are knowledgeable about industry financial trends, provided overviews on industry prospects in 2014.
Healthcare: Healthcare reform implementation and consolidation trends are two of the drivers behind the pickup in healthcare merger and acquisition activity that is likely continue through 2014, according to William Douglass, group head and managing director of CIT Corporate Finance, Healthcare.
The market is evolving so that healthcare companies focused on achieving growth and market expansion must move away from a fee-for-service to a fee-for-value model that emphasizes quality, low-cost outcomes. Information technology is a fertile area for investment, as data analysis is key to company’s business models, Douglass says.
Commercial Real Estate: With yields hard to come by in the bond market and rising interest rates on the horizon, real estate is a popular alternative with investors, says Matthew Galligan, president, CIT Real Estate Finance.
Financing is abundant, as banks, insurance companies, foreign investors and commercial mortgage-backed securities are all involved in the sale and refinancing of commercial properties during the recent wave of maturities in the collateralized mortgage-backed securities market. Despite the fact that interest rates are starting to creep up, they are still low by historical standards, allowing investors to lock in low rates in a climate of property appreciation, Galligan notes.
Restaurants: A number of trends are in place that suggest improving sales for the restaurant sector, including resilient consumer spending, rising housing prices and a falling unemployment rate, according to Bob Bielinski, managing director, CIT Corporate Finance, Retail and Restaurants. The fast casual sector of the industry — restaurants that aren’t fast food chains but offer limited table service — is poised to continue to grow and take market share from other industry sectors.
Access to capital looks favorable in 2014 so that both large and middle-market restaurant companies and the franchises of top-tier brands will have the ability to finance for acquisitions, remodeling and new construction, Bielinski notes.
A Final Word
Low interest rates, an overall improved economic environment and sector-specific trends are catalysts behind the favorable outlook for the restaurant, commercial real estate and healthcare sectors. Solid companies within these industries are likely to find commercial financing support so that they can expand their businesses, strengthen their balance sheets and participate in mergers and acquisitions in the coming year.
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